Praj Industries extends rally after it wins order to set up ethanol plant

In the past six months, the stock has zoomed 200 per cent as compared to a 23 per cent gain in the S&P BSE Sensex

Shares of Praj Industries surged 7.5 per cent to Rs 226.90 on the BSE in the intra-day trade on Friday, gaining 18 per cent in the past three trading days, after the company bagged an order to set up India's largest capacity syrup-based ethanol plant from a Godavari Biorefineries Ltd (GBL) in Karnataka. The company, however, did not disclose the value of the contract.

The stock was trading at its highest level since 2008. Moreover, the stock, which had it an all-time high of Rs 273 on December 14, 2007, has zoomed 200 per cent as compared to a 23 per cent gain in the S&P BSE Sensex, in the past six months.

"As a part of this project, Praj will expand the existing ethanol manufacturing capacity to 600 KL per day (KLPD) from 400 KLPD, using sugarcane syrup. When commissioned, this will become India’s largest capacity syrup based ethanol plant," the company said in a press release.

This capacity expansion planned by GBL is in line with the government’s Biofuel policy to increase the Ethanol manufacturing quantity in India using various sugary feed stocks. "Praj has over a decade’s experience in designing and building syrup to ethanol systems in overseas markets. This is expected to open more similar opportunities in syrup to ethanol manufacturing and ultimately boost ethanol production in the country," the company said.

"Praj trades at 19.4x our FY23 earnings. Traction in 1G, CBG, and 2G orders will support growth over the next two years. With its leadership in biofuel technology, Praj should benefit from upcoming opportunities in bio-mobility, bio-CNG, and RCM, with a global push for a sustainable environment. It has a strong balance sheet (net cash at Rs 400 crore) and a scalable business model. We have raised our earnings by 24%/30% for FY22/23," said analysts at Phillip Capital.

The brokerage now values Praj at 25x FY23 EPS (20x earlier) with a target of Rs 270.

Meanwhile, Praj Industries, last month, bagged the order from Hindustan Petroleum Corporation Limited (HPCL) for setting up Compressed Biogas (CBG) project at Badaun in Uttar Pradesh. The company had also received an order for Rs 226.90 crore from Indian Oil Corporation Limited (IOCL) for execution of water and waste water treatment system including Zero Liquid Discharge for Acrylic/Oxo-Alcohol Project.